11. As demand increases, the optimal economic order quantity increases at the sa
ID: 370000 • Letter: 1
Question
11. As demand increases, the optimal economic order quantity increases at the same rate of demand. True or False?
12. A firm's ordering cost per year is independent of its order quantity decision. True or False?
13. The parameters of the economic order quantity (EOQ) model include all of the following except:
A. order quantity.
B. demand rate.
C. holding cost per unit per year.
D. ordering cost per order.
14. Company A sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges Company A $40 per order and $50 per bottle. Company A’s annual holding cost percentage is 30%. Assume Company A operates 50 weeks in a year. What is the economic order quantity?
A. 200
B. 400
C. 500
D. 800
15. Store A purchases cases of fertilizer for its lawn-care business from a supplier who charges Store A $30 per order and $50 per case. Each case consists of five bags of fertilizer. Store A needs 2000 bags of fertilizer a year. Store A’s annual holding costs are 30%. If Store A’s order quantity is 40 cases, what is its average inventory level?
A. 89
B. 45
C. 40
D. 20
16. A critical ratio of 0.8 means there is an 80% chance that demand is less than or equal to the optimal order quantity. True or False?
17. Expected profit is a direct measure of how well a company serves its customers. True or False?
18. Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives a 70% discount for its bread at the end of the day. What is the salvage value of its bread?
A. $2.00
B. $0.60
C. $0.50
D. $0.10
19. Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is 400 or less?
A. 97.7%
B. 95.4%
C. 47.7%
D. 2.3%
20. The difference between the __________ and _____________ is the mismatch costs in the newsvendor model.
A. maximum profit, expected profit
B. maximum profit, expected sales
C. minimum profit, expected profit
D. minimum profit, expected sales
Explanation / Answer
11) False
EOQ is proportional to sqrt(Demand)
Thus, it does not increase at same rate
12) False
Basis the order quantity, the number of orders change. This will impact the ordering cost
13) A
EOQ = sqrt(2*Demand*Ordering cost/Holding cost)
14) Demand = 600*52 = 31200
Ordering cost = 40
Holding cost = 30%*50 = 15
EOQ = sqrt(2*31200*40/15) = 407
Hence, 400
Ans B
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